﻿ESARF.Y : STATE BAXKING IX IXDIAXA 



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subscription. The bank itself, not having any specie to lend, merely 

 passed a 82,000,000 credit on its books to the United States in 

 return for a foreign draft in its favor. If the federal government 

 could so far chsregard business morals as to collect a premium on 

 $2,000,000 where not a dollar was involved, it is eas}^ to suppose 

 that private speculators would go much further. The plan was 

 simple. The speculator subscribed for stock, borrowed the money 

 from the bank at six per cent, and if the bank failed no harm w^as 

 done to the subscriber. It was merely a matter of bookkeeping; 

 no money changed hands. If the bank succeeded, the interest on 

 the loan was six per cent, and the dividend on the stock often as 

 high as ten per cent. Here was a clear gain without any invest- 

 ment. Gradually the state came to require by law that more 

 capital be paid in, and that the bank make more of an effort to 

 maintain specie payments. All Indiana charters required specie 

 pa>TQents by the bank and the Free Banking Act required that the 

 bank of issue keep on hand a reserve of at least twelve and one-half 

 per cent of its circulation. ^ The Charter of 1834 provided for 

 $80,000 of specie to be paid in before the bank was opened; $30,000 

 by the subscribers, and $50,000 by the state.^ The Charter of 

 1855 required only $2,000 to be paid in, and specie was not called 

 for.' The Free Banking Act of 1852 required at least $50,000 of 

 capital stock in each bank. After the states had done their best, 

 it was still true that the majority cf tanks, before the Civil War, 

 did business with less than one-half their capital paid in. 



It was believed that the stock should be held locally. It W£S 

 generally felt either that a bank could be run to the detriment of 

 the community and for the exclusive benefit of stockholders, or 

 that it could be conducted in the interests of the community; though 

 in the latter case it might not pay such large dividends. One of 

 the common complaints against the Second United States Bank 

 was that much of its stock was held by foreigners, and that every 

 distribution of profits took a large amount of specie out of the 

 country. The same argument held with reference to local neigh- 

 borhoods, cities, and states. Nearly all early charters had pro- 

 visions against one man holding more than a limited amount of stock. 

 The charter of the Hartford (Conn.) Bank forbade anyone owning 

 more than thirty shares. Not more than half of the stock of the 

 Commonwealth Bank of Massachusetts was ever to be in the hands 

 of one person. A New York law made subscribers take oath that 



5 Laws of Indiana, 1852. 

 ^ Laws of Indiana, 1834. 

 ' Laivs of Indiana, 1855. 



